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When paying off credit cards in full....

With our tax return, we are paying off several credit cards and I want to know the best way to do it to make our credit better. Is it best to pay them off in full in one payment? Two half and half payments? Does anyone know what would be best?? Thanks for your help!

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braydensmama731

Asked by braydensmama731 at 4:23 PM on Jan. 31, 2009 in Money & Work

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Answers (11)
  • I would try to pay them off all at once. Our credit lady told us to pay off our debt, and then use one credit card for gas and pay it off at the end of every month. That should help to build your credit.
    NewMommyin06

    Answer by NewMommyin06 at 4:28 PM on Jan. 31, 2009

  • I would say pay it all off at once.
    We charge a fair bit each month but always pay it off in full each month before it is due.
    What impacts your credit is the amount of credit being used VS available.
    The more you have available but don't use the better.
    Paying on time is also important.
    Another thing is the longer you have accounts the better, so don't close the accounts.
    Maybe alternate one card each month so both have activity. If one has no activity for a long time, sometimes they treat it like a closed account. FYI - a lot of cards allow for many payments to be made a month. If you are concerned about the balance getting out of control you could make payments weekly.
    AussieMum2

    Answer by AussieMum2 at 4:44 PM on Jan. 31, 2009

  • Paying it off will help your credit because you will have more credit available...or unused credit. You also don't want to close them, just leave them open without balances. That way you have lots of available credit, thus showing how much the credit card companies trust you.
    Austinka

    Answer by Austinka at 4:52 PM on Jan. 31, 2009

  • Call first!!! Call the company and ask if they are willing to settle your account. I worked for discover card a few years ago and people would call in and ask what we'd take to settle the amount and sometimes it was way less than what they actually owed bc they were getting paid in full.

    I don't know about now, though,
    JennRN09

    Answer by JennRN09 at 4:53 PM on Jan. 31, 2009

  • Having a settlement on your credit file hurts your credit score, and it is not considered paid in full. It basically means that the credit company doesn't think that you can pay off what you owe and it affects your score more than having an account go to a collection agency.
    sillymoo

    Answer by sillymoo at 5:00 PM on Jan. 31, 2009

  • There was an expert on Oprah recently and here are a few of her tips:

    1. Do NOT pay your balance in full. If you have the money, put it into a savings account and pay the minimum plus the finance charge (at least) until the card is paid in full.
    2. Do NOT close any accounts, as that will be a poor reflection on your credit.
    3. Keep you debt to income ratio low, i.e. if you have a card with a $500 limit try not to go over $200-$250.
    4. Do NOT apply for credit cards with low available credit. It is better to have FEWER cards with larger limits than to have MORE cards with smaller limits, as it shows that companies trust you with larger amounts of credit.

    Hope this helps:)
    micrespo

    Answer by micrespo at 5:02 PM on Jan. 31, 2009

  • As tempting as it sounds, Do Not settle for a lesser amount on your credit cards! You will be responsible to pay taxes on the amount that was discounted and it reflects poorly on your credit as an unmet financial obligation.
    BlessedMommy64

    Answer by BlessedMommy64 at 5:09 PM on Jan. 31, 2009

  • Pay on the card with the highest interest rate first. When that is paid off then tackle the lower rate cards. The longer you have these lines of credit open, the better it reflects on your FICO score. Here is one tip. Buy Suze Orman's Young Broke and Fabulous book. Best 17 bucks I've ever spent.
    Anonymous

    Answer by Anonymous at 6:07 PM on Jan. 31, 2009

  • Find anything by Dave Ramsey. Pay off the cards and close the accounts. The more available "credit" you have open the less you are likely to get what you may need--why? Because a bank does not like to see a client that has over $20,000 available credit that they can max out once they get a loan. Learn to live on cash and you won't have to worry about your FICO score. Again, try to find info from Dave Ramsey---check out his website. But pay them off!!! Even at 6% that is like earning 6% on your money. And if you have higher interest rates, you are losing money by paying a monthly 10% interest and only earning less than 1% on savings. BUT make sure you have a t least a $1,000 in an emergency fund---and work on getting 3 months of expenses in an emergency account. BUT pay those cards off!! He also has a talk show on tv.

    Anonymous

    Answer by Anonymous at 9:13 PM on Jan. 31, 2009

  • Keeping the accounts open "just in case" means you are willing to go back in debt---NOT a smart move. Learn to manage your money. Having that "available" credit can be too tempting and before you know it--you have ran the cards back up.
    Anonymous

    Answer by Anonymous at 9:16 PM on Jan. 31, 2009

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